Entangled Alliances

photo credit: hitthatswitch

In yesterday’s Guardian, Simon Jenkins complained that none of the major UK parties are attacking the Chancellor Alistair Darling’s decision to bail out the banks in 2008. After watching Tuesday’s Chancellors debate, Jenkins was left wishing for some “good old Labour blood and guts”, someone who could say to the would-be Chancellors:

“You blew it! When those petrified, knock-kneed smoothies from the City came pleading for help, you caved in and gave them the people’s money. You panicked, you bunch of creeps.”

Now I’m all for a bit of bank-hating, and I agree it’s important to stand up to any ”petrified, knock-kneed smoothies” that come your way (has there ever been a better description of bankers in the credit crunch?) and I definitely agree with Jenkins when he says that the better option would have been to nationalise the banks, not bail them out, but the idea that a better option would also have been to let the banks fail isn’t left wing, it’s just wrong. And it’s particularly wrong to say this:

Of course we shall never know what the world would be like today had Darling reacted differently in 2008. It could hardly have been worse. Some scenarios, such as just letting the banks fail, are undeniably hairy, though the global market in finance is astonishingly resilient and would, by now, probably be picking up the pieces and getting back to normal. America still eats and breathes, despite the failure of Lehman Brothers.

Wow. Saying that America still eats and breathes despite the failure of Lehman Brothers is like saying that Dick Cheney still lives and breathes after his heart attack. Technically true, but avoiding the minor detail of the triple-heart bypass in between. The crash of investment bank Lehman Brothers started the credit crunch proper and almost brought the world’s financial markets to their knees. Its collapse sent waves of panic through the markets, causing investors to try and dump all their dodgy financial products, which simply made the crisis worse. The mistake of the US government was to assume that the financial markets could cope with the failure of Lehman Brothers, and it learnt its lesson by bailing out all the other massive banks that needed help, and in doing so (narrowly) averted the complete collapse of America’s banking system

If Darling had let banks like RBS fail instead of bailing them out, then Britain might have had its own mini Lehman Brothers crisis. Jenkins says “it could have hardly have been worse”, but it really could have. At least we still have a functioning banking system. Obviously this doesn’t mean we shouldn’t still be angry about the respective parties’ current approach to the banks - no-one seems to be willing to make the banks pay for the mess they created, and no-one is taking the steps necessary to stop it happening again - but venting this anger by wishing that we’d just told the bankers to, uh, go collapse themselves instead of bailing them out is not admirably Old Labour, it’s just silly.

Check out this FT articleby Richard Milne in the FT’s “Future of Capitalism segment: Nordic model is ‘future of capitalism’

photo credit: Today is a good day

“The world should consider adopting the Nordic approach to capitalism and learn from the region’s response to its financial and economic crisis in the 1990s in the attempt to stave off recession, according to the chairman of two of Europe’s biggest companies.

Jorma Ollila, chairman of Nokia, the mobile phone maker, and oil major Royal Dutch Shell, said the Nordic style of capitalism was characterised by openness to globalisation balanced by strong government programmes to protect people from its excesses and an egalitarian education system.”

I’m a huge fan of the nordic model for Government, economics and to some extent even society.  The Scandinavian economies and even their welfare system have proved remakrably resilient in recent years, despite being targets for right-wing attacks (particulalrly in the US) and bizarrely O’Reilly feels Sweden is a nightmare communist state.

They’ve shown that globalisation need not be a negative as long as the state acts as a levelling tool, of course such engineering would be far harder in more economically diverse countries such as the UK and France, but in principles the direction is a positive one.

photo credit: srqpix

Last month Britain was swept up in a maelstrom of rage after it was revealed that Fred Goodwin, the chief executive of the Royal Bank of Scotland, was due to receive a generous pension to the tune of a staggering £703,000 a year. The problem? The Royal Bank of Scotland is now 70% owned by the British taxpayer. Cue outrage from all sides: while the tabloids and broadsheets alike foamed at the mouth, government ministers went a bit mental and promised to suspend the rule of law. The controversy over Goodwin’s pension wasn’t just a matter of one man’s greed, however; it was a focal point for the public feeling of  helplessness, disbelief and disgust brought on by the realisation that the mighty, all-knowing financial powers we entrusted with our money are actually just a load of out-of-their-depth greedy idiots who’ve gone and squandered the lot.

Well, now the United States is having their “Goodwin” moment – and who knows where the chips will fall?

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Google who’s to blame for the economic crisis and you’ll be gifted a bold array of stark headlines from Business Week to the Guardian’s 25 people to blame. I think there is something of a wintry chill to the blame game.  With few pleasant distractions, many people are sharpening their knives for the creators of this mess. No one should be surprised, there needs to be some catharsis of public anger and who better a target than those in power or those with wealth. Nevertheless, while I think blaming is inevitable it’s also premature, and when we eventually pull out of the recession, and look to understand what occurred and how to prevent this kind of event in the future, the blame game as it currently stands will be a distraction from discovering the  underlying causes.

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